Sept. 28 (Bloomberg) -- Germany’s Social Democrats took the
first step toward a coalition with Chancellor Angela Merkel,
voting to open talks on joining her next government five days
after she won national elections.

A national meeting of 200 SPD delegates backed a party
leadership proposal to start exploratory talks with Merkel’s
Christian Democrats, party head Sigmar Gabriel said late
yesterday after about four hours of negotiations in Berlin. Five
delegates voted against talks and three abstained, he said.

“The SPD is ready to engage in talks,” Gabriel said.
“Mrs. Merkel won this election and we didn’t achieve our
desired result.” Still, the SPD “is going into these talks
full of self-confidence.” The starting date will be set later,
he said.

Coalition building after Merkel’s Sept. 22 election victory
is looking harder than is usual in Germany after her respective
partners in her first and second terms were each eclipsed by the
chancellor and went on to suffer their worst electoral defeats
since World War II. That makes the Social Democrats, with whom
she governed from 2005 to 2009, reticent about entering a repeat
of their so-called grand coalition.

Domestic Focus

Gabriel, who was Merkel’s environment minister during her
first term, said domestic policies such as the labor market,
wages and education would be SPD priorities in any formal
coalition talks. Peer Steinbrueck, the SPD’s chancellor
candidate, will take part in the initial negotiations, he said.

Party members will be consulted along the way, he said.
Opening formal coalition talks will require another vote by the
200-member body and any coalition contract will be put to a
broader membership ballot, Gabriel said. The SPD has “no fear”
of going into opposition or facing new elections, he said.

The “vocal rejection” among some SPD quarters has already
prompted Merkel’s Christian Democratic bloc to offer some
concessions on taxes and minimum wages, Carsten Nickel, an
analyst with Teneo Intelligence, said Sept. 26 in a note.
“Contrary to the noise about potential SPD resistance, a CDU-Greens coalition or even early elections, a grand coalition will
likely be in place before the end of November.”

Leipzig Convention

SPD members would be balloted at the end of any coalition
negotiations in time for the party convention which is due to
take place in Leipzig on Nov. 14-16, Sueddeutsche Zeitung
reported yesterday. There is resistance to a grand coalition
among many regional SPD associations, the newspaper said.

The party is divided over which policies from the SPD’s
program to give priority to in any coalition talks with Merkel’s
Christian Democratic bloc, three lawmakers, who spoke on
condition of anonymity because the deliberations are private,
said before the meeting.

Tax increases at the top end of the income scale, a
universal national minimum wage and caps on rent increases were
among the areas being considered, the lawmakers said. Some
factions are intent on demanding the Finance Ministry as the
price of a coalition, and others favor the Labor Ministry, they
said.

A majority of Germans favor a grand coalition, an FG Wahlen
poll conducted after the election, on Sept. 24-26, showed
yesterday. The poll of 1,293 voters for ZDF television found
that 58 percent said they would like to see the two main parties
form an alliance compared to 25 percent who said it was a bad
prospect, while 14 percent said it was all the same to them.

Thirty-two percent said they favored Merkel’s other option,
a coalition with the Greens, with 43 saying they were against
such a government constellation and 22 percent with no opinion.